The Government of Nepal has proposed a new bill that would require domestic airlines to provide up to USD 100,000 in compensation to the families of passengers who die in air accidents. The draft of the “Bill on Liability and Insurance of Domestic Airlines, 2082” significantly increases the current compensation ceiling, which is set at USD 20,000.

The Ministry of Culture, Tourism and Civil Aviation has made the draft public and is seeking feedback from stakeholders. The bill is part of the government’s effort to align domestic aviation standards with international norms, particularly those outlined in the 1999 Montreal Convention. Nepal ratified the convention in December 2018, which mandates standards for airline liability related to passenger injury or death, baggage loss, and cargo damage.

In addition to fatalities, the draft bill proposes compensation of up to USD 100,000 for passengers who sustain injuries, suffer physical impairment, or are permanently disabled in air accidents. The actual amount would depend on the severity of the injuries.

The bill also details airline liability in cases of baggage loss or damage. If checked baggage is lost, damaged, or destroyed, the airline would be required to compensate the passenger at the rate of up to USD 20 per kilogram, with a total ceiling of USD 5,000. For unchecked baggage—items carried personally by the passenger—the liability would be limited to USD 400. The airlines would not be liable if it can be proven that the damage resulted from the passenger’s own actions or negligence.

The bill further proposes clear compensation guidelines for damage caused to third parties on the ground as a result of an air accident. The liability limits are categorized based on the aircraft’s weight. For aircraft weighing up to 10,000 kilograms, the compensation limit is USD 25 million. For aircraft between 10,001 and 35,000 kilograms, the limit is USD 35 million, while for aircraft above 35,000 kilograms, the limit is set at USD 60 million.

Ram Krishna Lamichhane, Joint Secretary and Spokesperson for the Ministry, said the objective of the bill is to introduce uniform insurance coverage for both domestic and international flights. “The aim is to bring internal air passenger insurance up to international standards,” he said.

While the ministry believes that the proposed changes will not lead to a significant increase in airfare, airline operators have expressed concerns that the higher compensation requirements could raise insurance premiums. Anil Manandhar, manager at Shree Airlines, acknowledged the likelihood of a slight increase in premiums, which may marginally affect ticket prices. However, he said the impact would not be substantial. He also emphasized that implementing the Montreal Convention standards is now essential.

Until the bill is passed by Parliament and becomes law, the current compensation rate of USD 20,000 for fatalities in domestic air accidents remains in effect.

The draft legislation also introduces an integrated legal framework addressing issues such as flight delays, cancellations, injury or death during boarding or disembarkation, baggage and cargo damage, and other liabilities of domestic airlines. The ministry said this comprehensive approach is intended to better protect passenger rights and enhance accountability in the domestic aviation sector.

The bill further clarifies that airlines will not be held liable in three specific situations: if flight delays or cancellations are caused by bad weather, natural disasters, or security and technical issues at airports; if a passenger’s injury or death is proven to result from a pre-existing serious illness; or if the injury is caused by the passenger’s own gross negligence.